With the Labour government coming to power for the first time in 14 years, the expectations of the Autumn Budget 2024 have been widely speculated on. One announcement which came as a shock to people was the rise of Employer’s National Insurance from 13.8% to 15%. While this happens the secondary threshold, which determines when an employer is required to pay National Insurance Contributions, is set to decrease from £9,100 to £5,000 a year. Although this can bring anyone worry about their employment with this rise, it is particularly important to contractors working through umbrella companies.
What does this mean for umbrella-paid contractors?
Employer’s National Insurance is listed as one of the employment costs which is deducted from an assignment rate before any personal taxes are deducted.
As the employment costs are deducted from a contractor’s assignment rate, without an uplift from the agency or end-hirer, umbrella contractors could see a reduction in their take-home pay (post-April 2025).
Former tax inspector Carolyn Walsh states what all contractors need to do next:
“Agency contractors will need to sit down with a calculator, or just ask their umbrella company, to calculate a new assignment rate. It needs to be a rate which provides them as a contractor with pay parity in 2025/26, thereby negating the higher employer NICs and lower secondary threshold.”
Contractors who are concerned about the potential decline in take-home pay after April 2025 should contact their recruitment agency (or end-client if there is no agency in the supply chain) and request more information about rates in the future.
When is it happening?
The raise in Employer’s National Insurance by 1.2% to 15% will take place at the start of the next tax year on the 6th of April 2025.
Why is it rising?
Chancellor Rachel Reeves described the increase in Employer’s National Insurance as “difficult”. Reeves states that the increase in taxes is part of the Labour government’s plan to put more onus on employers to contribute to generate £25 billion to support the UK’s public spending. This is no surprise that money needs to be generated as the Autumn Budget has allocated an extra £25.7 billion to the NHS alone in this year and next.
Looking for a compliant umbrella company?
Want to learn more about how to keep compliant and ensure the correct amount of taxes are paid? Check out our top ten compliant umbrella companies. We never recommend an umbrella company which isn’t accredited by FCSA or Professional Passport to ensure the best in compliance. You can request a call back or get a free take home pay calculation from one of our top 10 umbrella companies today!
